EUTR - Bureau Veritas Due Diligence System - May 2016

European Timber Regulation (995/2010/EC)Bureau Veritas Due Diligence Solution

May 2016

Context & Scope

3Bureau Veritas Certification © 2016 - All Rights Rese rved

Which companies are obliged by EUTR?

► European authorities are competent to oblige any co mpanies based in one the 28 EU State-member . Therefore European companies which are the first to place a wood-based product on the European market are directly affected by this regulation.

► They have to perform due diligence before shipment and demonstrate no import of illegal wood.

► Otherwise they are exposed to legal risks / penalties defined by each EU member state (fines based on the value of goods, loss of tax from exporting countries, seizure of products, imprisonment, suspension of commercial activity)

1. European Companies importing wood-based products :

► Companies exporting wood-based products towards the EU.

► They are not directly concerned by the regulation but they have to demonstrate legal origin of all products in order to continue business relations with European companies and maintain access to the EU market.

► The risk for companies not performing due diligence is that they are exposed to being withdrawn from referencing list of their clie nts.

2. Non-European companies:


Products in the scope of EUTR

The European Timber Regulation (EU) No 995/2010 scope of products is based on the EU Customs code nomenclature.The Regulation applies to both imported and domestically produced timber a nd timber products .

Exempted Products

► Medical, dentist and vetarinary furniture► Tools (incuding wooden handles, brushes,

brooms,..)► Lamps and lighting► Pens and pencil,

Roundwood and raw materials►Fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms ►Wood in the rough, whether or not stripped of bark or sapwood, or roughly squared

1st transformation►Railway or tramway sleepers (cross-ties) of wood►Wood sawn or chipped lengthwise,►Sheets for veneering […], for plywood or for other similar laminated wood and other wood […] of a thickness not exceeding 6 mm ►Wood […] continuously shaped […] along any of its edges, ends or faces,►Particle board, oriented strand board (OSB) and similar board of wood or other ligneous materials►Fibreboard of wood or other ligneous materials►Plywood, veneered panels and similar laminated wood ►Densified wood, in blocks, plates, strips or profile shapes

2nd transformation►Wooden frames for paintings, photographs, mirrors or similar objects ►Packing cases, boxes, crates, drums and similar packings […] of wood; cable-drums [...]; pallets, box pallets and other load boards […] ►(Not packing material used exclusively as packing material to support, protect or carry another product placed on the market.) ►Casks, barrels, vats, tubs and other coopers’ products and parts thereof, of wood, including staves ►Builders’ joinery and carpentry of wood, including cellular wood panels, assembled flooring panels, shingles and shakes

3rd transformation and beyond►Pulp and paper of Chapters 47 and 48, with the exception of bamboo-based and recovered (waste and scrap)►Wooden furniture ►Prefabricated buildings

► Certain kinds of seats and sofas► Toys, ► Printed paper (books, newspapers,

pictures …)► Cork and derived products► Pieces of art► Musical instruments► Clocks and watches ► Waste products

Products concerned by the EU Timber Regulation


What about certification scheme ?Most of them are based on legality principles …

► Certification to FSC, PEFC or OLB is not considered a sufficient and automatic proof of compliance with the EUTR.

► Nevertheless, under certain conditions, they are significant contribution to a risk analysis . A critical assessment of the certificates are necessary

Source : FSC, Q&A on EUTR, version of November 7th, 2012Source : Regulation No. 607/2012/CE

BV Due Diligence System (DDS)


Due Diligence System

► The challenge for Bureau Veritas is to assess the r isk level of the scope of products of a company based on the evidences of legality pro vided.

► Exercising Due Diligence is the responsibility of the operator. This is a proactive and structured process, which needs to be documented, and operated as per these steps :

► 1. Collection of informationCountry / region of harvest, tree species, quantities imported, evidence of compliance with legislation

► 2. Risk assessment, based on information providedRisk assessment criteria need to be defined and results shall be documented

► 3. Risk mitigationAdditional investigation and implementation of appropriate measures➪ Actions proportionate to the level of risk➪ Implement sufficient control to secure sourcing

► Risk assessment is to be renewed at least within 12 months

► If capable, the operator can develop its own system, or use the system of a capable recognized Monitoring Organization by the European Commission like Bureau Veritas

Source : European Commission

The European Commission has

published guidelines to clarify the due diligence

process


Service offered: Maintaining access to EU market and Assessment of l egality

EU operator requests Due Diligence of his suppliers

The company is verified against Bureau Veritas Due Diligence System

EU companies can access your Due Diligence Statement

delivered for using BV DDS

EU MARKETMANUFACTURERS

RETAILERS

FORESTMANUFACTURERS

TRADERS

COMPANY TO BE VERIFIED

Results and Certificates in our IT system*

EU CLIENT(S)

EU companies can import their

productsVerification Statement delivered if risk is negligible

(valid for 12 months)

ACCESS TO THE EU MARKET


Local BV office contacts

suppliers, signs a contract

Supplier provides additional info

(products, suppliers,

evidences of legal origin) to local

office

Local BV office performs the risk

assessment

Non European supplierEuropean client Bureau Veritas in EU

EU client engages due diligence of supply chain

Supplier considered risk negligible for 12 months and recorded

in IT system

Y

N

Supplier with no statement until not found not negligible

1. Information collection 2. Risk assessment 3. Risk mitigation 4. List of approved suppliers

+ all documents proving due diligence and legal

origin

Roles :

Communication with supplier, follow-up of project through IT system and Bureau Veritas office in EU

Project management, supervision of IT system, reporting and QA by Bureau Veritas office in EU

If risk negligible for the given supply chain

Bureau Veritas local office

Stored in database with reports and

relevant documents

Doc review confirms risk

negligible supplier

BV DDS

Forms

Commercial Proposal

Application form Supplier + self declaration

BV DDS riskassessment Checklists BV DDS risk mitigation Checklists

BV DDS verificationstatement with supplier name and scope (tree

species, products, date)

Satisfactory audit by local

BV office

8. Risk Assessment and Risk Mitigation Action(s)

BV EU office collects detailson suppliers and products

If negligible risk

N

YIf risk not negligible


9. Verification Process for BV Due Diligence Soluti on

Annual review of risk assessment (and mitigation if necessary)

Bureau Veritas Certification local

teams perform due diligence.

Knowledge of local language and

regulation

Risk Assessment

Document review

Office audit

Field audit

Low risk

Medium risk

High risk

Risk Mitigation Action(s)

Shipment inspectionCritical risk

If risk non negligible

riskNegligible

Risk

Buyer requests check of supplier

OrSupplier initiative

Information collection Guidance from Bureau Veritas local offices on appropriate local documentation to be provided

Products of the supplier approved

Certificate delivered for approved scope of products

=> For non European suppliers: Access to European market

1

2

3

Main principles of Bureau Veritas Due Diligence System

(BV DDS)


Different checklists for the type of activity and e ach step of verification process

Checklists & Forms

Application Form: 4 checklists depending on the type of activity of the company (Forest Management, Forest Management Group, Processing & Trading, EU Economic Operator)

Risk Assessment: 3 checklists depending on the activity of the company (Forest Management, Processing & Trading, EU Economic Operator)

Risk Mitigation(s): 5 checklists depending on the recommended action(s) to mitigate risk determined during the risk assessment or previous risk mitigation action (Additional Document Review, Office Audit, Field Audit, Shipment Inspection – the last one not being performed by BVC Auditors)


Checklists: Risk assessment criteria

EU Risk assessment requirements are based on:

Country level: Some countries may be considered as presenting higher levels of risks due to: e.g. high levels of illegal activities, high levels of deforestation, corruption.

FMU* level: Timber must have been harvested by a legally registered company, within a legal FMU, and in compliance with legal requirements such as management plan, harvest license, etc.

Species level: Some species may represent a higher level of risk than other; e.g. CITES species, tropical species, etc.

Supply chain: The complexity of the supply chain and mixing of timber products from different origin will result in higher levels of risk.

FLEGT and Third party certification: FLEGT certificates or other third party certification can be taken into account.

*A “forest management unit” is a well defined and demarcated land area, predominantly covered by forests, managed on a long-tern basis and having a set of clear objectives specified in a forest management plan.


Checklists: Risk assessment criteria

Records & Documents

Country of origin level: Origin of all the timber and timber products (certificate of origin, invoices), Evidence of compliance with trade and customs legal requirements from country of origin available (e.g. Custom declaration, Export certificate, Payment of export duties), Corruption Index, Deforestation rates (FAO) etc

FMU* level: Documented evidence of legal operation available covering relevant national Forest management, Biodiversity conservation and Environmental requirements

Species level: Timber and timber product(s), Information regarding the type of ecosystem (industrial plantation, natural forest, primary ecosystem…), Protected species (CITES)

Supply chain: List of all suppliers with address and contact details, Volume/quantities purchased, processed and sold, Evidence of compliance with trade and customs legal requirements.

FLEGT and Third party certification: Valid certificate for a verified scheme issued by an independent third party, Registration on official verified scheme's website, Claim on official sales documents with a valid certificate number, etc.

For the local applicable legislation, you can use t he documents from the following links: - http://gftn.panda.org/?202483/Framework-for-Assess ing-Legality-of-Forestry-Operations-Timber-Processi ng-and-Trade - http://www.globalforestregistry.org/map


Checklists: Risk Levels

BV DDS Risk assessment framework is based on 5 levels of risk, from negligible to critical risk:

Risk level 1: Negligible risk – Registration on BV-IT Platform required

Risk level 2: Low risk – Registration on BV-IT Platform and additional risk assessment or document review required

Risk level 3: Medium risk – Registration on BV-IT Platform, additional risk assessment during office audit required

Risk level 4: High risk – Registration on BV-IT platform, additional risk assessment during office and field audit required

Risk level 5: Critical risk – Registration on BV-IT platform, additional risk assessment during office audit, field audit and shipment inspection required


BV DDS - Self declaration form


BV DDS - List documentation


BV DDS - Risk Assessment process


Risk level 1, 2 or 3With drop down menus for

standardized findingsDetailed BV DDS

findings

Detailed BV DDS Guidance

Risk criteria

BV DDS - Risk Assessment finding


BV DDS - Verification statement

► The verification statement provides information on:

� The company

� The products and supply chain that were verified

� Tree species involved

� Country / region of origin

► Only delivered to Suppliers who can demonstrate that their supply chain presents negligible risk

► Valid for 12 months (if no change)

► Registered in the DDS centralized database


► Secured access with differentiate reading / writting authorizations

► Each step of the process is recorded and verified documents can be enclosed along with audit reports

► This information is centralized and accessible in real-time by our teams over the globe

Use of an IT platform to record processinformation


Thank you!

Julia Lenkkeri

Lead auditor/ Forest Certification Product Manager Nordic

Tel. +358 10 830 8623GSM. +358 44 [email protected]

Bureau Veritas Finland

Sörnäisten rantatie 29FI-00500 HELSINKI, FINLAND www.bureauveritas.fi

EUTR - Bureau Veritas Due Diligence System - May 2016

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